Correlation Between Enbridge H and K2 Gold

Can any of the company-specific risk be diversified away by investing in both Enbridge H and K2 Gold at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Enbridge H and K2 Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enbridge H Cum and K2 Gold, you can compare the effects of market volatilities on Enbridge H and K2 Gold and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Enbridge H with a short position of K2 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge H and K2 Gold.

Diversification Opportunities for Enbridge H and K2 Gold

0.07

Correlation Coefficient

Enbridge H  K2 Gold

Significant diversification

The 3 months correlation between Enbridge and KTO is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge H Cum and K2 Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K2 Gold and Enbridge H is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Enbridge H Cum are associated (or correlated) with K2 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K2 Gold has no effect on the direction of Enbridge H i.e., Enbridge H and K2 Gold go up and down completely randomly.

Pair Corralation between Enbridge H and K2 Gold

Assuming the 90 days trading horizon Enbridge H is expected to generate 2.82 times less return on investment than K2 Gold. But when comparing it to its historical volatility, Enbridge H Cum is 10.32 times less risky than K2 Gold. It trades about 0.14 of its potential returns per unit of risk. K2 Gold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12.00  in K2 Gold on October 6, 2024 and sell it today you would earn a total of  0.00  from holding K2 Gold or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Enbridge H Cum  vs.  K2 Gold

Enbridge H Cum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge H Cum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge H is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

K2 Gold

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, K2 Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enbridge H and K2 Gold

The main advantage of trading using opposite Enbridge H and K2 Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge H position performs unexpectedly, K2 Gold can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in K2 Gold will offset losses from the drop in K2 Gold's long position.

The idea behind Enbridge H Cum and K2 Gold pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.